What is an ACH delay?

An ACH delay is a temporary hold on an electronic deposit from an acquiring bank to your direct deposit account. Processors impose an ACH delay on new merchant accounts as a way of lowering their risk. You may be asked to agree to an ACH delay if:

These are only a few of the reasons why a processor may ask for an ACH delay.

If you are asked to agree to an ACH delay, inquire as to why the delay is needed. The reason for the delay may be something that you can reconcile.

Some people refuse to sign an ACH delay because they take it as a personal insult. If you are asked for an ACH delay prior to having your merchant account approved, leave your feelings aside and think about the effects an ACH delay will have on your business. The ACH delay may not affect you very much, and could help you secure a new merchant account faster. Additionally, ACH delays are usually not permanent, with many lasting one year or less.

Effects of an ACH Delay on Your Business

An ACH delay sounds a lot worse than it is. Most businesses may not even notice the extra time that it takes for their deposits to be made. This is because of two factors: consistent deposits, and business NET payment terms.

Deposits are Still Consistent

If you have a constant stream of revenue from sales, it’s likely that you’ll hardly notice an ACH delay once you start accepting credit cards. The acquiring bank will make deposits a few days after a batch has cleared, so it will only be in these first few days that you’ll notice that there have been no deposits. After that, deposits from previous days’ sales will be available on a consistent, rolling basis. Even though the funds from sales made one day won’t be available the next, previous funds will become available every day.

NET Terms Alleviate ACH Delay Effects

Most businesses don’t need deposits to be made within 24-48 hours. Sure, it’s nice to have the money from sales quickly, but it’s usually not necessary. For example: Most product-based businesses (online and physical retailers) are given NET terms by their suppliers that make it possible for them to pay for merchandise up to 30 days after it is received. Even with the longest ACH delays, a business with NET-30 terms would be able to pay for product on time.

Effects on Tight Cash Flow Businesses

Businesses that have tight cash flow should avoid an ACH delay, as it will adversely affect business operation. For example: If you run a construction or home repair business, you’ll usually need to purchase materials to complete jobs. You wouldn’t be able to wait extra days for a deposit to be made from your merchant bank because you wouldn’t be able to purchase the materials needed to start your next job.

Every business is different, but most new businesses won’t have a problem getting started with a merchant account that has an ACH delay. Once you get to the point in the application process where a credit card processor would ask for an ACH delay, you’re almost approved. Starting the whole ordeal over again by applying with another processor is no guarantee that you won’t get asked for a delay again, and will only waste valuable time.

Fast Facts About ACH Delays

As you consider whether or not an ACH delay will hurt your business, keep these facts in mind:

ACH delays are not permanent; most only last one year

Merchant accounts are usually approved quickly once you agree to an ACH delay

Deposits are still consistent, so funds are still available regularly

Difference Between ACH Delays and Holds

ACH delays are not the same thing as a merchant account hold. Unlike ACH delays, you won’t know about holds in advance, potentially causing a significant crimp in your cash flow. Holds, also sometimes called account freezes, typically result when the processor suspects fraud. However, they can also happen for any unusual transaction activity, such as larger-than-normal purchases.

With a hold, your account is essentially frozen and you won’t receive the funds from recent card transactions until the processor investigates. Holds can last days, weeks, or longer. In situations where the processor suspects there’s a heightened risk of chargebacks, they will typically hold the funds (or a portion of the funds) for the duration of the chargeback window.

If you’re experiencing an account freeze, it’s important to work with your processor to provide any necessary documentation to prove the legitimacy of transactions.

Other Types of Restrictions

As noted in the introduction, ACH delays aren’t the harshest restriction a processor can impose. In fact, they’re one of the less disruptive. A more restrictive condition is called a rolling reserve, where a processor will withhold a percentage of your card sales for a fixed period of time.

When opening your new merchant account, be sure to review the conditions of any retrictions placed on your account, and be clear whether you’re receiving a rolling reserve or an ACH delay.

Ellen has a degree in English, which she puts to work every day researching and writing articles, processor reviews, and social media posts. She enjoys the challenge of explaining complex topics - making her a perfect fit for credit card processing - and strongly believes in CardFellow's mission of empowering business owners through education. When she's not busy following the latest industry news, Ellen can be found cycling the beautiful trails of southern New England, narrowly losing at pub quizzes, or practicing her trapeze skills in aerial circus class.